Fish Market v. G.A.A., Inc.

• Court: Court of Appeals for the First Circuit
• Decided: December 22, 1995
• Docket: 95-1074
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT



                                 ____________________

        No. 95-1074



                           FISH MARKET NOMINEE CORPORATION,



                                      Appellant,



                                          v.



                                    JOEL PELOFSKY,

                                UNITED STATES TRUSTEE,



                                      Appellee.

                                 ____________________

        No. 95-1483



                           FISH MARKET NOMINEE CORPORATION,



                                      Appellant,



                                          v.



                                G.A.A., INC., ET AL.,



                                      Appellees.

                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF MASSACHUSETTS



                       [Hon. Rya W. Zobel, U.S. District Judge]
                                           ___________________



                    [Hon. Richard G. Stearns, U.S. District Judge]
                                              ___________________

                                 ____________________



                                        Before



                                  Cyr, Circuit Judge,
                                       _____________



                             Bownes, Senior Circuit Judge,
                                     ____________________



                              and Boudin, Circuit Judge.
                                          _____________

                                 ____________________



            Stephen F. Gordon with  whom Peter J. Haley and Gordon & Wise were
            _________________            ______________     _____________

        on briefs for appellant.

            Eric  K.  Bradford,  Office  of  the  United  States  Trustee, for
            __________________

        appellee Joel Pelofsky, United States Trustee.



Douglas R. Gooding with whom Charles L. Glerum and Choate, Hall  &
            __________________           _________________     _______________

        Stewart  were on  consolidated  brief for  appellees  G.A.A., Inc  and
        _______

        H.N.R.G., Inc.



                                 ____________________



                                  December 22, 1995

                                 ____________________


BOUDIN, Circuit Judge.   Appellant  Fish Market  Nominee
                         _____________



            Corp.  ("Fish  Market") was  the  owner  of an  entertainment



            complex in Baltimore's Inner Harbor area which closed in June



            1989.  Fish  Market failed to  pay real estate taxes  for the



            years 1989-90 and  1990-91.  The property  was sold at  a tax



            sale on May 13, 1991, and, through a subsequent purchase from



            the tax sale buyer, appellees G.A.A., Inc. and H.N.R.G., Inc.



            eventually acquired non-possessory tax title to the property,



            subject to Fish Market's right of redemption.



                 On December 7,  1993, GAA and  HNRG obtained an  amended



            order  of redemption  from the  Baltimore City  Circuit Court



            requiring Fish Market to pay  $1,056,852.79 within 30 days or



            lose  its  right of  redemption.   On  January 6,  1994, Fish



            Market filed for protection  from its creditors under chapter



            11  of the  bankruptcy  code,  11  U.S.C.     1101  et  seq.,
                                                                ________



            forestalling under the automatic  stay provision (11 U.S.C.  



            362(a))  any further action by GAA and HNRG to foreclose Fish



            Market's redemption rights.



                 After an initial meeting of creditors,  11 U.S.C.   341,



            the United States  Trustee, also an appellee here,  filed for



            dismissal  or (alternatively)  conversion  of the  case to  a



            liquidation  under  chapter  7.   Following  a  hearing,  the



            bankruptcy judge  granted the motion  to dismiss the  case on



            March  31, 1994, noting that Fish Market had no employees, no



            ongoing  business operations,  no income,  and no  cash; that


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there was no indication  of any agreement for  new financing;



            and that the debtor was  unable to pay the property  taxes on



            the property and had left the property uninsured.



                 Upon dismissal by the bankruptcy court, Fish Market made



            an  oral  motion   for  a  stay  pending   appeal  which  was



            immediately  denied  by  the  bankruptcy judge.    That  same



            afternoon,  GAA and  HNRG  obtained from  the Baltimore  City



            Circuit Court final  decrees terminating Fish Market's  right



            of redemption.  GAA and HNRG paid just  over $1.4 million for



            the  property.   Thereafter,  it was  resold  to the  City of



            Baltimore for $1.7 million.



                 On  April  7,  1994,  Fish  Market  began  an  adversary



            proceeding in the bankruptcy court under 11 U.S.C.    362(h).



            It sought damages and  a temporary restraining order vacating



            the  final decree  of  the Baltimore  City Circuit  Court and



            preventing GAA and  HNRG from taking further action to obtain



            possession  of the property;  the premise was  that the state



            proceedings  had  violated  the  automatic  stay  of  section



            362(a).     The   bankruptcy  court   denied   the  temporary



            restraining  order on  April 15  and dismissed  the adversary



            proceeding on June 20, 1994.  



                 Fish  Market then  pursued two  separate appeals  in the



            district court.   The first appeal  challenged the bankruptcy



            court's dismissal  of the chapter  11 case;  this appeal  was



            dismissed as moot on the motion of GAA and HNRG.   The second


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appeal challenged the dismissal  of the April 7  complaint in



            the adversary  proceeding;  the district  court affirmed  the



            order  of  the  bankruptcy  court.   Fish  Market  separately



            appealed both district court orders.  We consolidated the two



            appeals and now affirm.   



                 Appeal  from the Dismissal of  the Chapter 11  Case.  We
                 ____________________________________________________



            consider first  whether Fish  Market's chapter  11 proceeding



            was properly  terminated.  Section 1112(b)  of the Bankruptcy



            Code,  11 U.S.C.     1112(b), provides  that  a case  may  be



            dismissed or converted  to chapter 7  for cause; Fish  Market



            poses  no challenge  to  the bankruptcy  court's findings  of



            fact, which amply justified the termination of the chapter 11



            proceeding.



                 Fish  Market nevertheless  insists the  bankruptcy court



            erred  by failing to explain its decision to dismiss the case



            rather  than to convert it  to a liquidation proceeding under



            chapter 7.  Citing In re Superior Siding and Window, Inc., 14
                               ______________________________________



            F.3d  240,  242  (4th Cir.  1994),  Fish  Market  argues that



            conversion  is  a separate  choice  that  must be  explicitly



            considered  by the bankruptcy court.  The short answer to the



            argument is that Fish Market waived it by failing to raise it



            in  the  bankruptcy  court.    In  re  Mark  Bell   Furniture
                                           ______________________________



            Warehouse, Inc., 992 F.2d 7, 9 (1st Cir. 1993).  
            _______________



                 The district court granted appellee's motion to  dismiss



            Fish  Market's  appeal on  mootness  grounds without  further


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explanation.  Apparently, the district court thought that the



            transfer  of the  property meant  that  there was  nothing of



            substance left  in the estate.   It  could be argued  that so



            long as the appeal in the adversary proceeding remained open,



            Fish  Market   retained  some   hope,  however  forlorn,   of



            recovering its right of  redemption.  We need not  pursue the



            mootness issue  further, preferring  to affirm on  the merits



            the bankruptcy court's dismissal of the chapter 11 case.



                 Appeal  from the Dismissal  of the Adversary Proceeding.
                 ________________________________________________________



            In  the adversary  proceeding,  Fish Market  argued that  the



            state court proceedings to  foreclose its right of redemption



            were  independently   unlawful  because  they   violated  the



            automatic stay of 11  U.S.C.  362(a), as extended by  Fed. R.



            Civ. P. 62(a)  for 10 days after dismissal of  the chapter 11



            case.   This  alleged violation,  Fish Market  argues, should



            entitle it at  least to damages,  if not to  a return of  its



            interest  in  the property  by  reestablishing  its right  of



            redemption.  



                 It  is common  ground  that state  court proceedings  to



            foreclose  a right of redemption are barred during the period



            while  the  automatic stay  is  in  effect.   Section  362(a)



            protects the estate of the debtor from adverse claims  unless



            the  court lifts  the stay  in particular  instances, see  11
                                                                  ___



            U.S.C.    362(d), or unless such  claims fall within codified



            exceptions  not applicable here.   But the stay under section


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362(a) itself expired as soon as  the judgment dismissing the



            chapter  11 case  was entered, 11  U.S.C.   362(c);  In re De
                                                                 ________



            Jesus Saez, 721 F.2d 848, 851 (1st Cir. 1983), unless Fed. R.
            __________



            Civ. P. 62  operated to extend  the stay, a question  we have



            never decided.



                 Excepting  injunctions,  receivership actions,  and some



            accountings,  Rule 62(a)  provides that  "no execution  shall



            issue  upon a judgment nor shall proceedings be taken for its



            enforcement until the expiration of 10 days after its entry."



            The  rule primarily serves to  give one against  whom a money



            judgment is entered time  to post a supersedeas bond  to stay



            enforcement  of that judgment pending appeal.  It is clear in



            this  case that no action by the appellees was an "execution"



            on  the  judgment of  dismissal.1    The only  question  that



            remains  is  whether   GAA's  and   HNRG's  commencement   of



            proceedings in  state court to terminate  Fish Market's right



            of redemption  constituted "enforcement" of  the judgment  of



            dismissal.  



                 Contrary to Fish Market's  position, Rule 62(a) does not



            purport  to make  a judgment  ineffective  for 10  days after



            entry; on the  contrary, the judgment retains  full force and



            effect for other purposes--e.g.,  res judicata.  Instead Rule
                                       ____   ____________



            62(a) merely  stays proceedings to enforce  the judgment, for
                                               _______



                                
            ____________________



                 1"Execution"  refers  to  process issued  to  enforce  a

            judgment--for  example,  an order  to  the  marshal to  seize

            assets to pay such a judgment.  Fed. R. Civ. P. 69.



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example, discovery  to determine  the location of  a judgment



            debtor's  property available  to satisfy  the judgment.   Cf.
                                                                      ___



            Huron Holding Corp.  v. Lincoln Mine Operating  Co., 312 U.S.
            ___________________     ___________________________



            183, 189  (1941)  (noting  that  although  supersedeas  stays



            execution it does  not impair the finality  of the judgment).



            We hold that a state court proceeding to foreclose a right of



            redemption is  not "enforcement"  of a judgment  dismissing a



            chapter 11 case.2        To  conclude,  the dismissal  of the



            chapter 11 proceeding was a proper disposition on the present



            record.  As  for the adversary  proceeding, we conclude  that



            Fed.  R.  Civ. P.  62(a)  does  not  extend section  362(a)'s



            automatic  stay  for  10 days  after  a  chapter  11 case  is



            dismissed,  resolving the issue left  open by In  re De Jesus
                                                          _______________



            Saez, 721 F.2d 848.  
            ____



                 Accordingly, the  decision of the district  court in No.



            95-1483 is affirmed;  the decision of  the district court  in
                       ________



            No. 95-1074 is modified to affirm the bankruptcy court on the
                           ________



            merits and, as modified, is affirmed. 
                                        ________


____________________



                 2Accord  In re  Whatley, 155  B.R. 775 (Bankr.  D. Colo.
                  ______  ______________

            1993),  aff'd, 169 B.R. 698  (D. Colo. 1994),  aff'd, 54 F.3d
                    _____                                  _____

            788 (10th Cir. 1995); In re Weston, 101 B.R. 202 (Bankr. E.D.
                                  ____________

            Cal.  1989), aff'd 123 B.R. 466 (9th Cir. B.A.P. 1991), aff'd
                         _____                                      _____

            967  F.2d 596 (9th Cir.  1992), cert. denied,  113 S. Ct. 973
                                            ____________

            (1993).



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